Good afternoon, everyone and welcome to the Dave & Buster’s Incorporated First Quarter 2016 Earnings Conference Call. Today’s call is being hosted by Steve King, Chief Executive Officer. I would like to remind everyone that this call is being recorded and will be available for replay beginning later today. Now, I would like to turn the conference over to Jay Tobin, Senior Vice President and General Counsel for opening remarks. Sir, please go ahead.

Thank you, Kevin, and thank you all for joining us. On the call today are Steve King, Chief Executive Officer; Dolf Berle, President and Chief Operating Officer; and Brian Jenkins, Chief Financial Officer. After comments from each of Mr. King, Mr. Berle and Mr. Jenkins, we will be happy to take your questions. This call is being recorded on behalf of Dave & Buster's Entertainment Inc. and is copyrighted. Before we begin our discussion of the company’s results, I would like to call your attention to the fact that in our remarks and our responses to your questions, certain items may be discussed which are not based entirely on historical facts. Any such items should be considered forward-looking statements and relating to future events within the meaning of the Private Securities Litigation Reform Act of 1995. All such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Information on the various risk factors and uncertainties has been published in our filings with the SEC, which are available on our Web site at www.daveandbusters.com under the Investor Relations section. In addition, our remarks today will include references to adjusted EBITDA and store level EBITDA which are financial measures that are not defined under Generally Accepted Accounting Principles. Investors should review the reconciliation of these non-GAAP measures to the comparable GAAP results contained in our earnings announcement released this afternoon, which is also available on our Web site. Now, I’ll turn the call over to Steve.

Thank you, Jay, and good afternoon, everyone. We appreciate your participation in today's quarterly conference call and your interest in Dave & Buster’s. I am going to begin with some quarterly highlights, afterwards Dolf will detail our current initiatives and plans and Brian will review the key financials and update our annual guidance. Finally, I will conclude with a discussion of our development and remodeling efforts as well as the initiation of our $100 million share repurchase program. We had another great first quarter characterized by strong top line growth, comparable store sales at the higher end of our annual guidance range and significant operating leverage. I am especially excited by our 17.7% revenue growth, demonstrating that our newer stores are adding significantly to the top line, enabling us to continue to leverage our margins and grow the bottom line at an even faster rate. While comparable store sales decelerated relative to last year's fourth quarter as we had anticipated, total revenue growth accelerated because of the sales generated from newer stores. In fact, 18 of the 84 stores that we operated during the first quarter or 21% are non-comp stores. And this reflects the growth we have realized over the past two years in expanding our footprint across the country. Moreover, we were delighted to have achieved outstanding growth in store level EBITDA and adjusted EBITDA in dollars terms as well as record store level EBITDA and adjusted EBITDA margin. This has in turn enabled us to increase our annual guidance as Brian will explain later. Comparable store sales increased 3.6% during the first quarter. The quarter was marked by significant shift in seasonality and relatively mild weather creating some significant week to week volatility. The year ago comps comparison for the first quarter was up 9.9%, so on…

Thank you, Steve. Let me begin by publically thanking out store teams across the country for a strong first quarter performance. They are doing an outstanding job growing our top line and increasing profitability. With that in mind, I would like to share a few comments on three important areas of focus. The first is new products and promotions. Secondly, our ongoing margin improvement initiatives, and thirdly, new store opening. As I shared on our last call, our primary guest target is 21 to 39 year old, what we refer to as play together young adult given their interest in exploring new amusements as well as food and beverage offering. They also have a passion for sports viewing in a social setting. In addition to this audience we try to appeal to two secondary targets which are families who visit us on a walk-on basis, and corporations having third party events. We will continue our strategy of targeting all of these groups with new news of interest to them. With these targets in mind, we continue to focus on advertising spend on TV aimed at the play together young adult audience. Early in the quarter our marketing campaign led by CMO, Sean Gleason and his team focused on sports and football related messaging tied to our D&B Sports branding including a one day all you can eat wings promotion. Then we transition to our popular everyone is a winner promotion for five weeks that we have run successfully in each of the two prior years. In the last four weeks of the quarter, we switched to a broader theme of new is what we do. Our media strategy consisted of national cable advertising. Mike & Mike on ESPN focused on D&B Sports featuring the Super Bowl and March madness and…

Thank you, Dolf and good afternoon, everyone. Before walking through the numbers, I want to express my appreciation to the Dave & Buster’s team for a great quarter and for setting us up for what looks to be a great year. In fact, as detailed in our earnings release, we are already raising our guidance for 2016 which I will review shortly. But first let's discuss the first quarter. Total revenues increased 17.7% to $262 million, up from $222.7 million in the prior year. Revenues from our 66 comparable stores increased 3.6% to $215.1 million, up from $207.7 million, while revenues from our 18 non-comparable stores including three that opened during the quarter, increased 181.6% to $48.2 million. That’s up from $17.1 million in the prior year. Note this was the largest number of non-comp stores we have ever had in a first quarter and Dave & Buster’s and reflect the positive impact that new development is having on our revenue growth and ultimately our profitability. Turning to category sales. The mix shift to the more profitable gaming side of our business continued as total amusement and other sales grew 21.6% while food and beverage collectively increased 13.1%. During the first quarter amusements and other represented 55.3% of total revenues, reflecting 180 basis points increase from the prior year. Breaking down the 3.6% increase in comps, amusements were 0.61%, food sales increased 0.7%, while our bar business grew 0.5% for a combined food and beverage increase of 0.6%. We extended our track record of outperformance to Knapp Track as Steve mentioned, to 16 consecutive quarters and increased our two-year gap in that by approximately 60 basis points. In terms of cost, total cost of sales was $46.2 million for the first quarter and as a percent of sales improved 150…

Thank you, Brian. I would like to first discuss the recent and upcoming store development activities and ongoing remodeling programs before transitioning into the new share repurchase authorization. During the first quarter we opened three large format stores, Rochester, New York, El Paso, Texas and Capitol Heights, Maryland which is outside of DC. Both Rochester and El Paso were entirely new markets for us while we expanded our presence in Washington DC market with Capitol Heights. In the second quarter we are opening two stores, one in Little Rock, Arkansas and the second in Florence, Kentucky, which is a suburb of the Cincinnati market. The remaining four or five additional stores are planned to open in the back half of 2016 for an annual total of nine to ten locations. Four store openings are in markets where we already have a brand presence and if we hit the top end of the range, six store openings will be in brand new markets for D&B. In terms of sizes of these stores, we are using the entire range between 25,000 and 45,000 square feet. Three of the stores will be 30,000 square feet or less. Three will be 40,000 square feet or more and the remaining three to four stores will be in that 32,000 to 36,000 square feet range. By the end of the fiscal year we will have nearly 90 stores operating across 33 states but they are still less than half of our long-term plan for over 200 stores in North America. Given what's going on with some of the department store brands and big box retailers, there is a lot of real estate becoming available in markets to meet our criteria. And while others are having challenges at their mall locations, our mall stores are performing quite…

[Operator Instructions] We will take our first question from Nicole Miller of Piper Jaffray. Please go ahead.

I want to hear a little bit about the advertising. How does the weeks compare year-over-year in the first quarter and how do they line up for the remainder of the year? Are you getting incremental impression or what is your read on how marketing is benefitting? Thanks.

So first number of weeks on a year-over-year basis was the same for the core advertising but we did advertise some additional weeks on kids oriented television with five extra weeks as Dolf mentioned in his comments. So that’s more of a reallocation than more dollars and more impression, but the bulk of the dollars are still going against those play together young adults, as we call them, and those weeks were the same on a year-over-year basis. For the balance of the year, our anticipation is that we will add one or two more weeks in the third quarter and that is in response for filling in some holes in the schedule during the football viewing season that we had in last year's calendar. So third quarter, it appears that we will add some weeks. And we haven't fully determined exactly what we are going to do in the fourth quarter. We may come back and add some weeks in the fourth quarter as well but as it sits right now, our current plan is for the bulk of the advertising, another week or two in the third quarter.

We go next to Andrew Strelzik with BMO Capital Markets. Please go ahead.

So I had two questions. The first one, you provided the guidance on the last earnings call which was the end of March and you said that the quarter exceeded your internal expectations. So is the implication then that the last month of the quarter, the exit rate was better, number one. And number two, was that really top line driven, was it cost driven? Any commentary on day parts, in the last quarter you called out some of the weakness on the late night. So if you can just give any color on where it was better than your expectations?

Yes. The way I would describe it as, first of all I am not sure I would draw any substantive conclusions about momentum, so to speak, of how period one, period two, period three performance for us. It really was probably the most volatile quarter since Brian and I have been with the company. And in large measure that was because of the calendar and how some of the calendar things shifted around. A little bit because of the weather as well. So I wouldn’t read anything to that, that the momentum was stronger in P3, for example, than it was in P1.

Okay. If I can sneak one more in there. About a year ago now, you tested in one of your stores some virtual reality. Just wondering how you see that playing into the concept going forward over the next several years. If that’s an opportunity that’s on your radar.

Okay. So first I am going to let Brian talk to the day part question that we didn’t quite get in before you asked your third question.

Andrew, yes. A little bit about day parts, we had indicated on the fourth quarter that we had seen some better lunch, afternoon balance sheet and that continued into the first quarter. Lunch, afternoon was our strongest day part and weekends were our strongest day part. I think it has to do in part due to some of the increase you saw in kids advertising where we pretty much doubled the number of weeks that we were advertising over the course of the quarter. So I guess [indiscernible].

It's still a small portion of the overall spend, less than 10%.

Effective [indiscernible] media spend for us and we give impressions for fairly inexpensive rates.

And then as it relates to VR, we have tested some VR products and I would say that our results are not compelling from an overall revenue growth standpoint at this point. And I don’t think that means we are going to give up on VR. I still think there is something to it and there is a probably a way for us to roll that in a way that we will create some significant, either attraction for us or in a potentially meaningful increase in revenue. But I think that what we have seen so far is that the content is such that people are likely to do it a single time and then not repeat, which makes it more difficult for -- so it has some novelty value, I guess is one way to think about it. And so people are willing to try it but they don’t tend to play it over and over.

We go next to Sharon Zackfia with William Blair. Please go ahead.

I wanted to ask about the RFID, which you mentioned in your commentary. Can you talk about how you are rolling that out? Is it going to be a broad rollout or a test and what kind of data you will get back from the RFID if it will be kind of enhanced data versus what you get from the cards?

Sharon, we don’t yet, I mean potentially this will be a replacement for cards. There is no difference by virtue of the way the machine reads it compared to the way it will read a power card. So there is not really anything different in that element of it. And in terms of kind of how [it is going] [ph] to do, we view it as a relatively low risk proposition. We are basically rolling it to the entire system and basically we are going to be selling these items for $10 with about $5 worth of power card value on them. They can obviously add to it beyond that. We think it will just be a more convenient way for people to access the games and activate the games then a power card itself.

We have a wrist band that looks a lot like a [indiscernible] in way that I guess could wear, kind of exciting. Three different colors. We have got a lanyard that you could put around your neck and [indiscernible] ability to activate a game and then actually a wand that probably would be more attractive for the younger guests. And so we have got a couple of devices that we are going to be rolling out. So we are excited about them.

Okay. And then separately, I know you talked about the first quarter being volatile, have you seen the second quarter volatility subside?

I would answer that as, no. I think it continues into our second quarter. I think we still feel good about the annual guidance we have given but the day to day and week to week volatility remains.

[Operator Instructions] We go next to Brian Vaccaro with Raymond James. Please go ahead.

Just wanted to start with a quick clarification. Brian, did you say menu pricing on the food category was 2.2% in the quarter?

Yes. 2.2% on food, 1.7% on bev. And it gets close to an effective 1% overall price increase for the quarter.

Okay. And I think on the last call you had indicated, maybe thinking about taking a little bit more menu pricing on the food side for the year than historically. Is that still the case or has there maybe been a change maybe due to the fall deflation on the food side just played out?

Yes. I would say, we are 2.2% right now. I think we were talking about 2.5%, maybe even heading towards 3%. I think we are going to -- I think it's going to be hard for us to get to 3% for the year given where we stand right now. We were around 2.6% last year. I think we are going to be directionally in a similar spot.

Okay. All right. That’s helpful. I wanted to just change gears to...

And the good news is our margins, as you saw, are really really good. I mean we have moderating food cost, we have got e-ticket that’s clearly gave us a big -- had a big impact on Q1, will have some impact on Q2 and then it will moderate as we roll over. The gross margins picture is reflected first this year.

Yes. That certainly seems to be the case. Just switching gears to the new share purchase authorization. Is there a leverage ratio that you are targeting sort of on a go-forward basis? Also can you remind us what the maintenance level of cash use we should be thinking about at the of each quarter. Thank you.

So I will answer the first question, is we really didn’t set this up as a target ratio for leverage as much as to say that we would really like to maintain our share count and make sure that it doesn’t fill up because of what we are doing from a compensation standpoint. The authorization enables us to do that and so that’s the primary purpose of what we have authorized. As it relates to the maintenance cash level...

We will probably around -- I mean we were in the upper 20s I think, on our balance sheet at the end of the first quarter. At the end of the year, 26 or something the prior year. We are probably around 20, high teens, kind of working capital cash in the business. Those levels are a little higher than what we would have to have at the maintenance level.

We go next to [Brian Weadon] [ph] with Stifel. Please go ahead.

This is Brian on for Paul Westra. I just had a quick one for you guys on comp guidance. So it seems that it came up a little bit quarters, it kind of came within the prior guidance. Can you just maybe talk a little bit more about the moderating cannibalization that you are talking about?

Yes. I mean we had indicated on our year-end call and talked a little bit about the '15 class of new stores where we opened ten stores, eight of which were in existing markets. And a lot of those opened up late in the first quarter, so in fourth quarter it was 15. So we really didn’t see a big cannibalization impact in 2015. As we headed into this year, we were expecting to see cannibalization and we did. In line with our expectations, we hadn't really told, cited a specific number and I am not sure I am going to do that today. But we expect that to moderate somewhat over the course of the year. And the '16 class is geared more towards more new markets. Six of the stores that we are going to build this year if we go the high end of the range will be in new markets. So we don’t anticipate the same level of cannibalization at the back part of this year.

And at this time there are no further questions. I would like to turn the conference back over to your presenters and management for any additional or closing remarks.

Well, thank you very much for your continued interest in Dave & Buster’s. We look forward to seeing many of you at the Piper Jaffray Conference, the William Blair Conference next week, or the Jefferies conference in the following week, which we are attending all three of those. And beyond that, we will back with you in early September with our second quarter results. Thank you.

Ladies and gentlemen, this does conclude today's conference. We thank you for your participation.